Trends

RIDING THE WAVE OF COMPETITION

At a time when federal operating subsidies for mass transit systems are being phased out, the private sector is gradually being allowed to step in to pick up the slack. Notable developments are occurring in Chicago, New York, and Los Angeles.

In the Windy City, shared-ride taxi service was legalized in December. Cab drivers now have the option of offering lower-cost service, based on zone charges, to passengers willing to share rides with people going to other destinations. Cabs offering this service identify themselves via an orange pennant on the radio antenna or by a shared-ride sign in the front window. Columnist Bob Greene reported that during an unexpected late-afternoon December snowfall, the system worked like a charm, providing cabs to all who wanted them under circumstances that would normally have been nightmarish.

Chicago is also benefiting from the deregulation of private ride-sharing arrangements. Under a state law enacted last fall, owner-operated commuter vans were exempted from local licensing and taxation and from all rate regulation, so long as the fares charged simply cover operating expenses. For-profit commuter vans and buses are still prohibited from offering services to the general public, but private subscription bus services continue to boom.

In New York City, the de facto monopoly of the city's 11,787 medallion taxis is being challenged by limousine operator William Fugazy. In February, Fugazy began operating 50 radio-equipped Chrysler New Yorkers as the Fugazy Express. He plans to add 100 per month, to a total of 6,000 vehicles. Fugazy says his fares will be competitive with those of the medallion cabs, although his cars will not be allowed to cruise the streets looking for fares, being restricted to radio calls. At present, only 3,000 of the medallion cabs answer radio calls, so Fugazy's fleet represents substantial new competition in that segment of the taxi market. His 6,000 new legal cabs will join an estimated 30,000 nonmedallion cabs—a black-market response to the city's attempt to maintain a privileged position for the medallion cabs. The New York Times editorialized that the Fugazy Express could "prove to be the thin edge of a deregulatory wedge, demonstrating the virtues of competition for taxi services."

The Southern California Rapid Transit District (RTD), meanwhile, is also considering privatization moves in an effort to cope with federal cutbacks. A study of the RTD's express bus service by the Southern California Association of Governments found that this premium service, used mostly by business executives, is among the most highly subsidized of all transit agency's offerings. Comparing RTD's express buses with those of private (unsubsidized) express bus lines, the study concluded that costs would be reduced by 50 percent if private buses were used. Privatizing just 22 RTD express bus lines could save taxpayers $5 million a year. The Los Angeles Times has endorsed the proposal, as well as the idea of allowing private van or jitney services to fill in the gaps caused by other RTD cutbacks.

Urban Institute transit expert Ronald F. Kirby endorses such moves. In a recent interview, Kirby urged an end to municipal transit monopolies and the introduction of competition from private vans, jitneys, shared-ride cabs, and bus lines. "The monopolies that city bus companies have are a holdover from the streetcar era," says Kirby. "Competition should have been introduced into the system long ago."

TRICKLE-DOWN RESURRECTED

Trickle-down economics, a theory popular during the prosperous 1950s, is a pariah in the eighties. The theory—that as the rich get richer so do the poor—fell from intellectual grace when historians concluded that the prosperity of the Eisenhower years had fallen to the rich and middle class but had altogether bypassed a large population of impoverished Americans. Hence the advent of Lyndon Johnson's Great Society and the War on Poverty philosophy that only massive social-welfare spending can eradicate poverty.

Thus does Charles Murray, former chief scientist at the American Institutes for Research and now with the Heritage Foundation, present the roots of the current social policy orthodoxy. It is a view that Murray rejects, claiming that "the clearest, most persuasive explanation of what happened to poverty during the last three decades is: the trickle-down theory indeed works—and the Great Society's main claim to success is mostly artifact."

Using official government data, Murray shows that it is real growth of GNP, not increased social-welfare spending, that correlates with declines in poverty. In fact, writes Murray, "poverty has actually gotten worse as social-welfare expenditures have increased, when the effects of GNP are factored out of the equation."

The evidence Murray presents is compelling. During the 1950s, when social-welfare expenditures were relatively small, the extent of poverty declined. It dropped further during the '60s, an era of large social-welfare expenditures. But at the end of the 1970s, after a decade of massive social-welfare expenditures, poverty had not declined. Indeed, from a 1973 low of 11.1 percent, the number of impoverished Americans rose to 13 percent in 1980. The GNP data fill out the picture. In 1970, 1974, and 1975, real GNP went down; in those years and only in those years during the '70s did the percentage of Americans living below the poverty level increase. During the other years of that decade, poverty decreased. Real GNP dropped during two years (1954 and 1958) in the '50s, and it was precisely during those two years that poverty was on the upswing. Furthermore, GNP increased every year during the '60s, and poverty declined in each year of that decade.

According to Murray's analysis of the data—which are complete for the years 1947–78—a real GNP increase of $100 billion should statistically correlate with a 1.9 percent decrease in poverty (assuming that social-welfare expenditures are held constant). By contrast, from a $100-billion increase in social-welfare spending, writes Murray, "we can expect that the percentage of people living beneath the poverty level will increase—yes, increase—by about 1.2 points, when the effects of GNP are held constant."

Murray's analysis—which appeared in the February 21 Register (Orange County, California) as an adaptation from a forthcoming book published by the Heritage Foundation—concludes: "Since 1947, it has been our experience that increases in GNP produce reductions in poverty, under very different political and social conditions. It has been our experience that increases in social welfare expenditures are not associated with this effect."

SUPPORTING BRIDGES

Scarcely a month goes by without a newspaper or magazine article on the perilous condition of American bridges. Typical was the Parade article of February 28, 1982, pointing out that 223,200 of the nation's 524,966 bridges are either structurally deficient or functionally obsolete. Like most such articles, this one proposed no real solution, implying only that somehow more taxes would have to be extracted from people.

Yet unwittingly, the Parade article contained the key to solving the bridge dilemma: "Probably the best inspected bridges," wrote author Jack Harrison Pollack, "are operated by independent or semi-autonomous bodies that can spend their toll revenues on frequent inspections and repairs." New York's Triborough Bridge and Tunnel Authority, for example, maintains seven major bridges and two tunnels from its $600,000 a day in toll income. By contrast, city-owned Brooklyn Bridge is falling to pieces.

In other words, when governments (read, politicians) operate bridges, the likelihood is great that they will spend their money on sexy, vote-getting projects and ignore mundane matters like bridge inspection and repair. It is widely acknowledged that "deferred maintenance" is to blame for the sad state of our government-owned and -operated bridges.

Yet one journalist has understood this connection. Writing in the January/February 1982 issue of Technology, Jeanne McDermott asks the logical question: "Given high interest rates and severe cutbacks in public spending, why not convert bridges to private ownership?" Why not, indeed? McDermott cites the fabulously successful investor-owned Ambassador Bridge linking Detroit with Windsor, Ontario—and its competitor, the investor-owned Detroit-Windsor Tunnel. The bridge has a pretax cash flow of $6 million a year and is, needless to say, impeccably well maintained. It demonstrates, says McDermott, "that private ownership is feasible—possibly even attractive—because of the size of the cash flow and the tax write-offs."

There are several ways of privatizing existing bridges. One is simply to sell (or give) the deed to a private company that would charge tolls and keep it in good repair. Another is to set up a quasi-private toll authority that would contract out the operation of the bridge. A third option is the leaseback arrangement, already used by some firms to buy new buses for lease to transit districts. US Steel has expressed strong interest in using one of these options to build a replacement for the decaying Thompson Run Bridge in Duquesne, Pennsylvania. Because heavy trucks can no longer use the bridge, the 36-mile detour is costing the company over $1 million a year.

One problem with privatization is the need to charge tolls. Conventional toll booths cause traffic congestion. Moreover, not all bridges have enough traffic to generate attractive revenues at reasonable tolls. One answer to the latter problem is to have one firm own several bridges, with revenues from the busiest ones off-setting losses on the low-traffic ones. Just this principle has been used in Italy in the construction and operation of the "motorway" (intercity expressway) system by private companies. For example, the Autostrade Company was given a contract in 1968 to build and operate 700 kilometers of additional motorway in economically depressed southern Italy, to be financed by toll increases on the remainder of its 2,200-km system.

The toll-booth congestion problem is on the way to solution by automatic vehicle identification (AVI) technology (see "Rush-Hour Remedy," REASON, Jan.). The Port Authority of New York and New Jersey, operator of the George Washington Bridge and the Lincoln and Holland Tunnels, has an active AVI research program under way. It plans a pilot test in which 300 to 500 buses using the Lincoln Tunnel will be equipped with microwave-based AVI equipment. The Port Authority's Robert S. Foote expects AVI to be introduced to motorists as a "premium" system and considers its maximum potential to be equipping about half of all the vehicles using its bridges and tunnels. So those concerned about the privacy aspects of automated toll payment will retain the option of waiting in line and plunking coins into the basket.

The essential point is that the technology for automated fare collection is at hand. Bridges can be converted to toll facilities and therefore privatized—before they begin collapsing all around us.

LOOK, UP IN THE SKY—IT'S PRIVATIZATION

The growth of private-sector launch services continues. Space Services, Inc. (SSI), the Houston-based firm whose initial rocket exploded on the launch pad last summer (see "The Second Space Race," REASON, Nov. 1981) is alive and well. The firm announced in February that it has asked to buy two surplus solid-fuel ICBM motors from NASA for an August suborbital test flight. It is also talking with the Air Force about purchasing surplus Minuteman I second-stage solid-propellant motors for development of a booster with orbital capability. Los Angeles-based Space Vector Corporation has for several years been producing the Aries sounding rocket for NASA, using the Minuteman motors. SSI has now contracted with Space Vector for engineering support services.

SSI has hired former Kennedy Space Center director Lee R. Scherer as a consultant to explore the feasibility of leasing federal launch facilities, either at Cape Canaveral or at Vandenberg Air Force Base, and is currently studying the possibility of building its own satellite launch site near Hawaii's Mauna Loa volcano. It has also hired former astronaut Deke Slayton and former Johnson Space Center engineering and development director Maxime Faget.

Privatization is also making a foothold closer to the ground—at airport control towers. Five of the 66 control towers shut down by the PATCO strike have been reopened—under private-sector contracts. First to be privatized was the tower at Owensboro, Kentucky, where the controllers themselves formed a company—Air Traffic Control Services, Inc.—that landed a contract to operate the tower. The other contracts have been won by firms that were already in the tower operation business. Barton ATC won the contract for Gilette, Wyoming, while Midwest ATC picked up Enid, Oklahoma, and Farmington and Hobbs, New Mexico. Also seeking tower-operations contracts is Pan American World Services, which has experience overseas operating control towers.

COMMUNICATING COMPETITIVELY

In February, American Telephone & Telegraph announced that it will divide its 22 operating companies into seven independent regional firms, before divesting them in accordance with the Justice Department's recent antitrust settlement. Most people assume those seven firms will continue to operate as regulated monopolies, while AT&T faces an increasingly competitive long-distance market.

Not so Nicholas von Hoffman. In a recent New Republic article (Feb. 3), the syndicated columnist raised a provocative question about the local companies' future: "Once they're spun off into independence, what's to prevent them from going into the cable TV business?" Think about it for a minute. "They have every major city wired. Overnight, merely with a change of legal status, all homes may become cable homes, whereby your local phone company supplies not only that service but also electronic Yellow Pages, classified ads, and supermarket displays." At one stroke, the monopoly of local cable companies could be broken. And since cable companies are already starting to compete with phone companies in providing data communications (see Trends, Jan.), so would the monopoly of local phone companies.

Several barriers do stand in the way, however. Aside from the narrow bandwidth of existing telephone lines (far from adequate to send conventional TV signals), the proposed Justice Department settlement forbids the divested local phone companies from offering any services other than local telephone calls—forever. Late in January the Federal Communications Commission's Common Carrier Bureau zeroed in on this, noting that "the decree itself could become an unnecessary barrier to competition." The bureau's report recommended that the decree be reevaluated every 10 years, with the restrictions remaining only if a judge found them to be still in the public interest. The other potential barrier is the probable unwillingness of state public utility commissions to give up their regulatory control of "the telephone monopoly" or of local governments to relinquish control of "the cable monopoly."

Yet every month brings further evidence that these services are not natural monopolies. In March, for example, the FCC began accepting license applications for cellular radio systems. These are computer-controlled networks of radio frequencies, forming a grid pattern throughout a metropolitan area, designed to facilitate a huge expansion of mobile telephone volume. The FCC will be issuing only two licenses in each market—one to the local phone company and the other to a radio common carrier (RCC). Existing RCCs—generally small firms—are banding together to compete with the telephone giants. "We're going head-to-head with the phone companies on this," says Gordon M. Kelley of Kelley Radio, in Seattle. His company has joined forces with four others to form Interstate Mobilphone Co., to offer continuous cellular service from Eugene, Oregon, to the Canadian border. In New York City, 12 RCCs have formed Cellular Systems, Inc., and other combines are springing up elsewhere. Industry consultants told a congressional hearing in February that, although mobile phone service will be the initial focus of these systems, personal portable phones (a la Dick Tracy wrist radios) and data distribution systems that bypass local telephone lines are also in the works.

And large industrial users continue to set up their own communications systems, bypassing the local telephone network. M/A-Com, Inc. has developed its own interstate voice, data, and video network, which costs $1.5 million a year to operate—compared with an estimated $5 million via AT&T telephone lines. Federal Express Corp. has linked together its three Memphis offices via a private microwave network and plans similar systems in 15 other cities. Planning Research Corp. built its own local phone network to serve its McLean, Virginia, office complex and its various tenants. Concludes telecommunications consultant Don Alexander of Theodore Barry & Associates, "Local telephone service has always seemed to be a natural monopoly, but more and more competition is coming."

FEDERAL LAND SALES: A BOOMING IDEA

The idea of selling off federal lands to reduce the national debt (see Trends, Feb.) is rapidly gaining momentum. An aide to Sen. Paul Laxalt (R–Nev.), a leading proponent of the idea, told Public Land News (Jan. 21), "We're talking about selling off a lot of BLM [Bureau of Land Management] lands. We're talking about grazing land, oil and gas lands, hard rock mining lands, the big ticket items." How much land might be involved? Since the average BLM land sale over the past five years brought in $20,000 per acre, the aide estimated that the sale of just 10 million acres (out of the government's 775 million acres) could yield $200 billion to reduce the national debt.

Disposing of that much land at market prices could not be done without congressional action. That was made quite clear by two recent reports. A recent General Accounting Office study, performed at the request of Rep. Ken Kramer (R–Colo.), found it impossible, without "an extensive staff and considerable time," to provide a comprehensive picture of all federal land holdings and of the best procedures for selling them off. And a UPI-Better Government Association investigation of present government land-disposal practices revealed a system "rife with politics, mismanagement, and bureaucratic infighting."

Nevertheless, action of some sort seems likely. On February 25 President Reagan issued an executive order setting up a Property Review Board and instructing the head of each executive agency to report within 60 days the amount of all its unused or underused property. The Wall Street Journal carried both an editorial (Jan. 25) and an op-ed piece (Feb. 5) endorsing federal lands privatization.

Laxalt's aide told Public Land News, "With a big push from the White House we can get a bill out of Congress by August and certainly by the end of the session." And Arizona businessman Fred Hervey has formed the Reduce Our Debt Foundation (P.O. Box 29021, Phoenix, AZ 85034) to educate people about the size and composition of the national debt and to show how the sale of federal lands could significantly reduce it. Slashing the debt by selling off lands could be an idea whose time has come.

PRIVATE FIRE FIGHTING HEATS UP

Unreported by the media, representatives from five profit-making fire protection firms got together in Las Vegas the weekend of January 29–30 to form the Private Sector Fire Association. The new organization aims to raise the visibility of such firms and to make private fire service a live option for hard-pressed city governments.

Especially noteworthy was the participation of Wackenhut Services, Inc., the $200-million-a-year, Florida-based security firm. Company founder George Wackenhut has apparently decided that privatization is the wave of the future. Already the company has picked up its first fire protection contract—a three-year stint with Hall County, Georgia (which abolished its county fire department three years ago). Wackenhut plans to make Hall County its "model" operation and is aiming to be in the fire business in five other communities by year-end. The firm's prior fire-fighting experience has been at the Kennedy Space Center and in the Saudi Arabian oil fields.

Although there are at least 14 private fire services in this country, only three appear to be geared up for nationwide bidding at this point: Wackenhut, Arizona's Rural/Metro Fire Department, Inc. (the pioneer firm in the industry), and J.J. Security, Inc. The latter firm provides airport fire and rescue service at the Green Bay and Madison, Wisconsin, airports, at Kansas City International, and at both Will Rogers Field and Wiley Post Field in Oklahoma City. But both Pan Am and TWA are reportedly seeking to enter the airport fire/rescue business. And Philadelphia-based ARA Services, a major contract operator of school buses and cafeteria services, has expressed interest in fire contracting as well. So it may not be long before cities are faced with a multitude of bidders for fire protection services.

Even the Small Business Administration has gotten into the act. Last year it hired a consulting firm, Gage-Babcock & Associates, to prepare a report on the entrepreneurial possibilities in this field. The May 1981 report, "The Small Business Firm as Provider of Fire Department and Emergency Medical Services in American Communities," provides a wealth of useful information to would-be suppliers of these services.

SAYING "NUTS" TO NATO

REASON is not alone in suggesting that it is time to rethink the one-sided NATO alliance, by which US taxpayers subsidize the defense of our European competitors (see "European Security Counsel," Feb.). Over the last few months this idea has begun to sweep the nation's op-ed pages.

Syndicated columnist William Pfaff raised the issue last November. After attending a high-level conference on the subject, he argued that "NATO is at a point at which it must be rethought." He warned that unless European leaders faced up to the changed strategic situation, popular support for NATO in this country would soon collapse.

Evidence of that incipient collapse quickly appeared. Twice in December, the Wall Street Journal's op-ed page featured lead items questioning NATO: The first, by economist Ronald C. Nairn, argued that Europe's security is a matter for Europeans to decide; "America's choice is to recognize Europe's right and thereafter, logically, to go home." The following week political scientist Paul Seabury weighed in with "NATO: Thinking about the Unmentionable," in which he pointed out that a withdrawal of US troops "need not be an irrevocable rupture with our NATO allies, and it certainly would be a necessary act of strategic realism, grave as it would be." Little more than a week later, columnist Joseph Kraft concluded a column on Europe with these words: "The melancholy fact is that this country may well serve international security best by freeing itself from some of the burdens of the Atlantic Alliance."

But the strongest statement yet has come from New York Times columnist William Safire. Reviewing the history of the US troop presence in Europe, in a February column, Safire identified their real purpose: to serve as a tripwire to ensure that the United States would, of necessity, be involved in any attack on Western Europe. And the fact is, because NATO conventional forces are so badly outnumbered by the Warsaw Pact, their only defense could be with nuclear weapons. Yet NATO member governments are now reluctant to modernize their nuclear forces. So our troops are, in effect, a suicide squad. Hence, says Safire, "If our 350,000 men are not in Europe to fight effectively—able to use nuclear weapons to stop any attack—then they should not be in Europe at all."

LESS AID, MORE HELP

In recent years, a new approach to the foreign-aid problem—first, how to get aid money into the hands of those who need it, and then how to get those who need it to use the money productively—has been taken by some aid-giving governments and international donor agencies.

The traditional strategy has been to infuse subsidized rural credit systems of poor countries with large amounts of money. These credit systems—which, in India and Mexico, for example, have received hundreds of millions of foreign-aid dollars—are attractive because (1) donors can pour lots of money into them quickly, (2) the aid appears to be focused on urgent food production, and (3) the rural poor are supposedly benefited by the below-market-rate credit. A pair of analysts—Robert Vogel, an economics professor at Syracuse University, and Dale Adams, professor of agricultural economics at Ohio State University—has pointed out (Wall Street Journal, Jan. 21), however, that the results of this strategy have often been disappointing.

The problem, according to Vogel and Adams, derives from the structure of the rural-credit system. A recipient government uses the foreign exchange to pay for imports; its central bank then loans an equal amount of local currency—at low interest rates—to rural credit institutions, which, in turn, are to lend the money—again, at cheap rates—to farmers. The actual result, however, is that much of the credit gets "diverted out of agriculture; most cheap loans end up in the hands of the non-poor, and the financial vitality of local lenders is undermined as they become addicted to cheap money and lose interest in mobilizing voluntary savings," the analysts contend. Then, as the lending process gets politically entangled, "loan default problems mount," the authors note, "and financial intermediaries sit around like baby birds with their mouths open, waiting for someone to give them more cheap loans to process."

Adams and Vogel suggest that less aid can get better results than these credit systems when used instead to set up rural commercial savings-and-loan facilities. The analysts point to a project in Peru—citing, too, successful projects in Taiwan and Korea—that "has been mobilizing substantial voluntary savings in several poor areas—in spite of rates of inflation in Peru exceeding 50% per year and declining per capita incomes." In just a few months after it started a campaign to attract local savings, a small cooperative bank, which had received a modest grant to get the savings-mobilization program started, had far exceeded its goal for attracting deposits. By the end of the project, it had mobilized more than $1 million.

Adams and Vogel note that the bank succeeded by raising interest rates on savings to the legal limit; by offering convenient hours and simple, efficient service; by using publicity and prizes to attract deposits; and by rewarding employees who secured new deposits. "Substantially more small farmers and other rural poor," report Adams and Vogel, "were drawn to the deposit services of the cooperative bank than had ever been reached by numerous programs of low interest loans." And the bank's funds were loaned to local inhabitants—for farming and other investments—at commercial rates. Not only did the bank become a profitable business, but its success spurred several credit unions in the area to become more aggressive in efforts to attract savings.

The stimulation and reinforcement of "appropriate economic policies in low income countries," Adams and Vogel conclude, "is far more important than shipping more money from rich to poor countries." Especially in light of Reagan administration plans to cut back foreign aid, the Peru experience provides a model of how to do more for the world's poor with less.

DOWNZONING DOWNGRADED

When local government rezoning diminishes the value of a piece of property by restricting what can be done with it, does this constitute a "taking" of property for which the owner must be compensated? The New Hampshire Supreme Court has ruled unanimously that it does, in Burrows et al. v. City of Keene (N.H., 432 A.2d 15).

The particulars will sound familiar. A land developer purchased 124 acres in the city of Keene for $45,000, intending a residential subdivision. Upon presenting his subdivision plan, he was told that the city wanted to preserve the land as open space and would offer to purchase it. But the city then appraised the property at just $27,000, based on its value as open space—even though its own tax assessment listed the value as $41,406, close to the purchase price. When the city offered $27,900 for the land, the owner refused and proceeded with his subdivision plans. One year later the city denied permission for the subdivision and subsequently amended its zoning ordinance to include 109 of the 124 acres in a "conservation zone." The developer sued, arguing that the city's action constituted inverse condemnation—a taking of property for which compensation was required.

In its forthright decision, the New Hampshire Supreme Court agreed. It noted that the state constitution "makes explicit what is implicit in the Fifth Amendment…namely that 'no part of a man's property shall be taken from him…without his consent.'" It further recognizes that "acquiring, possessing, and protecting property" is a natural right not bestowed by the Constitution but simply recognized by it. Consequently, the state's "so-called police power," from which zoning derives, is necessarily limited by the right to just compensation.

"Police power regulations such as zoning ordinances and other land-use restrictions can destroy the use and enjoyment of property in order to promote the public good just as effectively as formal condemnation or physical invasion of property," wrote Justice Brennan in a 1981 US Supreme Court case, San Diego Gas & Electric v. City of San Diego. Citing Brennan and various state precedents, the New Hampshire court ruled that downzoning does indeed constitute a taking. The city was ordered to pay compensation for the diminution of value resulting from the taking, as well as attorney fees and costs.

If a city wants to secure a public benefit such as open space, it may not require a single individual to bear the burden of its cost, said the court. And although a city may prohibit injurious use of property, "the normal development of land for residential purposes is not" an injurious use.

Interestingly, too, the court added this further warning: "Planners and other officials should be aware of possible personal liability for bad faith violations of a landowner's constitutional rights which may go beyond the damages recoverable for inverse condemnation. Cities and towns should also be aware of possible 42 U.S.C.A. §1983 actions for damages for violations of the constitutional rights of citizens to be compensated for injuries suffered." Bureaucrats, beware!

DECOMMUNIZING COMMUNISM

With their establishment in 1958, rural communes became the fundamental social and political units of China's countryside. As the supposed building blocks of an ideal society, the communes dominated nearly all aspects of rural life—social services, schooling, recreation, etc.—and managed the nation's farming. Recently, however, and with the support of the nation's most powerful leader, Communist Party vice-chairman Deng Xiaoping, China has embarked on a plan to phase out completely its 52,000 rural communes. In January, 100 of them were dissolved, and if the results are favorable the rest of the communes will be similarly terminated by 1985.

In place of the communes—which were becoming an increasing burden on the nation's economy because of their bureaucratic complexity, inefficiency, and negative influence on farmers' productivity—elected township and district governments handle administrative functions, while the peasants, either individually or collectively, assume management of agricultural production. Rural reforms implemented three years ago, which allowed farmers greater independence from the state, already have been responsible for much new prosperity in the rural economy.

Under the commune dissolution plan, the land is still publicly owned, but farmers work it individually or in voluntary cooperation. Rural industries and other former communal enterprises are turned over to collectives or to the newly elected local governments. The new arrangements, like the previous rural reforms, rely more on individual responsibility and initiative and less on governmental supervision. Indeed, the state agricultural commission vice-chairman, Du Rensheng, expects that farmers, freed from the communal yoke, will voluntarily band together in various collective enterprises to meet their needs, as has already been the case in several provinces.

To the west, Afghanistan's Soviet-backed regime of President Babrak Karmal is learning a lesson that may spare that country the ill effects of duplicating China's failed 25-year experiment with rural communes. The Marxist regime announced in February its abandonment of an extensive land-reform plan that would have affected the nation's tribal areas, which constitute nearly three-quarters of the country. The move, made in response to the rural inhabitants' intense resistance to the government's reform initiatives, acknowledges the traditional authority of tribal and religious leaders.

MILESTONES

Thanks, But No Thanks. Wishing to avoid the regulations and paperwork headaches that accompany federal contracts, the American Electronics Association in January pleaded with the House Science and Technology Committee not to pass its proposed Small Business Innovation Development Act. Randy Knapp, the association's spokesman, told the committee members, "We do not believe companies can be made more competitive by being sheltered from competition." Knapp suggested tax deductions and credits as more effective ways of fostering technical developments.

Shocking Proposal. Police officials in Atlantic City have decided that they just haven't been very successful in trying to enforce laws against the world's oldest profession. So they want prostitution legalized in the casino town. Politicians, however, expressed shock at the proposal, which, it is reported, is unlikely to be enacted into legislation.

Privatize Social Security. In an interview published in The Socioeconomic Newsletter (Feb.–Mar. 1982), social-policy analyst Peter Germanis of the Heritage Foundation proposed that "Social Security should be made solely into an insurance program in which benefits are based on contributions, plus interest." Germanis does not believe that "there is any reason why private-sector alternatives can't provide for the same contingencies as Social Securities does."

Time Up for Overtime? Seeking alternatives to the 5-day, 8-hour-a-day work week, a growing number of employees are calling for an end to a 1937 California law that requires overtime pay for those working more than 8 hours in a day. Though the law does provide for some exceptions—it now acknowledges, for instance, the 4-day, 10-hour-a-day week—it would be an obstacle to widespread implementation of further flexible work schedules, such as a 3-day, 12-hour-a-day week—an arrangement increasingly attractive to those wishing less commuting time and more weekend time.

Ability Tests Pass. After a four-year study of ability tests—such as civil-service tests and college entrance exams—the National Research Council of the National Academy of Sciences concluded that such tests are not biased against minorities. Though the council warned that ability tests cannot judge valuable personal characteristics and acknowledged that the tests are culture-dependent, it concluded that at present such tests are singularly effective in evaluating developed abilities and predicting educational and job success—for minorities as well as for whites.

Property Rights Shored Up. A California District Court of Appeal ruled unconstitutional the state coastal commission's guidelines that require owners of coastal property to grant beachfront access to the public in exchange for permits to develop the property. Though the court did not rule against the commission's authority to require public access to the beaches, it judged that the commission had been abusively exercising its authority, ignoring the rights of property owners.

Golden Eagle. The US Gold Commission proposed that a new gold coin—the American Eagle—be issued by the Treasury Department. Not intended as legal tender with a fixed monetary value, the coin could be held or used as a speculative investment. The value of the coin would vary with the market price of gold, and profits from selling the "eagles" would be exempt from the capital-gains tax. Legislation will be submitted to Congress later this year, and easy approval of the coin is expected.

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Ayn Rand, R.I.P.

Long-time readers of this magazine know well that its inception was inspired by the works of Ayn Rand, who died on March 6 at the age of 77. The founders of the magazine, and many of those associated with it to this day, learned a great deal from Miss Rand's writings. More than that, many of our associates and staff have been inspired by her uncompromising identification of the human individual as a rational being in a natural world that is capable of being understood when clearly focused upon and as a being capable of attaining happiness when that understanding is applied to human conduct. REASON magazine, which through its name is openly beholden to Miss Rand's philosophical values, continues to be inspired by the leadership of her genius.

Miss Rand had always been extremely guarded in her support of ventures in the world of ideas over which she did not have complete control or whose staff she did not fully know and approve of. REASON had, accordingly, not been among the publications she recommended. But anyone familiar with her works can testify that she could only have been proud of what she had inspired in the magazine's content and editorial direction.

Ayn Rand never received the accolades she fully deserved from the culture whose distinctive essence she has done more than anyone else to ground philosophically and to highlight in literature. It is impossible to tell whether the future will remedy this failure. Suffice it to note that in the community of philosophical scholarship, there is beginning to emerge an interest in Miss Rand's work. In the next several years, numerous journals and publishers will come out with discussions of Miss Rand's ideas, lessening to some extent the shameful neglect to which she has been subjected not only by left-wing collectivists but by the supposed defenders of the American philosophical/political tradition, namely, conservatives. We wish to mention in particular one such development in the field of scholarly publishing, an anthology edited by Profs. Douglas Den Uyl (Bellarmine College, Louisville) and Douglas Rasmussen (St. John's University, Jamaica, New York), Reason and Freedom: Essays on the Thought of Ayn Rand (University of Illinois Press), due to be published in 1983.

—Tibor Machan